TRANSFER TAXES

ESTATE & TRUSTS ESTATE refers to the mass of properties left by decedent or testator to his
heirs or beneficiaries. TRUST is the right to the property, real or personal, exercised by
one person for the benefit of other parties. Parties to a Trust:
a.Trustor or grantor- one who created the trust
b.Trustee or fiduciary one who may hold the property for the benefit of other
p e r s o n k n o w n a s beneficiary.
S o m e t i m e s , t h e f i d u c i a r y i s a l s o t h e n beneficiary
c.Beneficiary
Estate may be the subject to tax, if it is under your administration. It may only be under
administration or settlement if the properties of the decedent are settled under judicial settlement.
If the estate is under extra-judicial settlement, it is not subject to tax because that will
not earn income considering that the heirs agreed to settle the estate extra-judicially.
W h e n w e s p e a k o f j u d i c i a l s e t t l e m e n t , t h i s m a y i n c l u d e e s t a t e o r
intestate proceedings.
Trust may be subject to tax if the trust is irrevocable
.
Non-taxable trust are:
1. Revocable Trust.
The income here will be taxed in so far as the recipient of the same is concerned.
2. Employees Trust.
If an employer establishes a pension trust for the benefit of the employees, that pension trust is not
taxable.
The trust is revocable if the power to revest the title to the property of the trust is
vested:
1. in the grantor or in conjunction with other person who does not have the substantial adverse interest
in the disposition of the property
2. in any person who does not have substantial adverse interest in the disposition of the
property.
I n i r r e v o c a b l e t r u s t , y o u c a n n o t t r a n s f e r o r r e v e s t t h e t i t l e o f t h e prop
erty.
No substantial interest in the disposition of the property he must not be the beneficiary.
If the properties of the estate is not invested in a business, so ten heirs are just co-owners of
the property, that is not taxable because co- ownership as a rule is not taxable.
If the heirs decide to continue the business, such that the administrator or may manage
the same, that will become an unregistered taxable partnership.
Estate and trust may be taxed on the same manner and on the same basis as in the
case of individual taxpayers. So, they may claim the deductions under Section
34 as long as these deductions were paid or incurred in connection with the business of that
estate or trust.
Estate and trust are entitled to personal exemptions P20,000.
SPECIAL DEDUCTIONS (this can be availed of only by estate and trust):
1. In the case of intestate, the executor, or administrator may deduct the
income distributed to the heirs during the particular year when such estate
is still undersettlement.2. In the case of a trust, the income may be distributed to the beneficiaries

during that year may also be deducted. The trustee or fiduciary may distribute
the income or
accumulate the income. The trustee has the discretion whether to distribute t
heincome to the beneficiaries during the taxable year or to accumulate the same and
distribute such income after the lapse of certain period of time or year. In the event that
income of the trust is distributed to the beneficiary, this particular amount may also be
claimed as deductions.
Questions:
If there are two (2) trust created by one trustor or grantor, how do we tax the income of that
trust?
Answer:
Under the
l a w, t h e t a x a b l e i n c o m e o f t h e s e t w o ( 2 ) t r u s t m u s t b e consolidated. That
trust should be taxed as if they constitute one trust.
Situation:
Grantor X created 2 trust. One is A trust created and the other is B trust. Thereis only one beneficiary
named Y. Let us assume that the taxable income of trust A is P10,000. The
taxable income of B trust is P20,000. The total taxable income is P30,000. We will tax these 2trust
separately but through consolidation. In paying the tax after applying the applicable tax rate to the
taxable income of P30,000, the tax due should be apportioned to trust A and B. So, for purposes of
income tax, the taxable income of these 2 trust should be consolidated, but for purposes of
paying the tax, the tax due should be apportioned.
TRANSFER TAXES
Taxes may be imposed on onerous transmission of properties or on thegratuitous
transmission of properties.
Transfer taxes that are imposed on the onerous transmission of properties:
1. VAT (value-added tax)
2. Percentage Tax (excluded this 1998 Bar)
3. Excise Tax (also excluded)
CONTENTS OF THE BACK PAGES
DIVISION OF GROSS ESTATE:
1. INDIVIDUAL WHO DIED SINGLE- G. E. includes all that he owns at the time of death
2. MARRIED DECEDENT - his estate includes his exclusive properties and his shares in
the conjugal properties BUT NOT the exclusive properties of the surviving spouse PROPERTY
OWNERSHIP bet. SPOUSES- NCC before Aug. 3, 1988> CPG- EXCLUSIVE PROPERTY under
N.C.C.
1. brought into the marriage as his/her own
2. acquired during the marriage by LUCRATIVE TITLE
3. acquired by RIGHT of REDEMPTION or EXCHANGE with other exclusive properties
4. purchased with exclusive money- CPG under N.C.C.
1. acquired by ONEROUS TITLE- common fund

2. acquired by INDUSTRY/WORK, SALARY or either

3. FRUITS< RENTS or INTERESTS [conjugal/exclusive]
4. all properties not determined to be exclusive shall be presumed to be conjugal
FAMILY CODE - after Aug. 3, 1988
- ACP- EXCLUSIVE PROPERTY under the F.C.1. gift, donation, contribution exclusively given to one
of the spouses only- gift and fruits/income considered exclusive2. INHERITANCE given exclusively to
one spouse- gift or fruits/income considered exclusive3. acquired of personal and exclusive useexcept JEWELRY4. exclusively owned before marriage including fruits /income IF spouse has
children from the former marriage
5. purchased from exclusive fund.
EXEMPTIONS FROM ESTATE TAX- special laws
1. Benefits received [GSIS, SSS]
2. proceeds of GSIS life insurance
3. Benefits received U. S. Veterans
4. Reparations WW II Veterans
5. Retirement benefit- if included in gross estate6. proceeds of group insurance
Decedents interest
assets that are still owned by decedent at the time of death to the extent of his equity or interest in
any property whether as exclusive owner, conjugal owner, or common owner.
COMPOSITION OF GROSS ESTATE[DI, T-GPA, RT, T-IC, P-LI, T-CD]
1. Decedents Interest
2. Transfer by virtue of general power of appointment
3. Revocable Transfer
4. Transfer for insufficient consideration
5. Proceeds from life insurance
6. Transfer in contemplation of death funeral expenses include:
1. expenses for interment
2. mourning clothing [widow, children]
3. expenses for wake before burial
4. charges for rites and ceremonies incident to interment
5. cost of burial plot
6. tombstone or monument
7. obituary or death notices
JUDICIAL EXPENSES
1. Accountants fee
2. Appraisers fee
3. Administrators fee
4. Attorneys fee
5. Docket fee
6. Stenographers fee
7. other expenses of court hearings
CLAIMS AGAINST THE ESTATE
- obligations of the decedent contracted in good faith while still alive but remains unpaid
at the time of death

UNPAID MORTGAGES OR INDEBTEDNESS RULES: (claimed as deductions)

1. the said mortgage/indebtedness must have been contracted during the decedents lifetime in good
faith for an adequate and full consideration in money or moneys worth
2. the value of the decedents interest in the property mortgaged is included in thevalue of
the gross estate
-must be undiminished by said mortgage/indebtedness
3. Must not include:
A. any income tax upon income received after the death of decedent
B. property taxes not accrued before his death
C. any estate tax
LOSSES fire, storm, shipwreck or other casualty, robbery, theft, embezzlement
RULES:
1. must not be compensated by insurance
2. must have been incurred during the settlement of the estate BUT NOT LATER than
the last day for the payment of the estate tax (6 mos.)
3. Not claimed as deduction in an income tax return of the taxable estate
TAXES which are not DEDUCTIBLE
1. Income tax or income received after death
2. Property taxes not accrued before death
3. Estate tax COMPUTATION of VANISHING DEDUCTION FORMULA:
INITIAL BASIS GROSS ESTATE X E. L. I. T. and transfers for public purposes
SHARE OF SURVIVING SPOUSERULES:
1. The gross conjugal estate shall be diminished by expenses and charges
EXCEPT those chargeable to the exclusive properties
2. The NET amount shall be divided into two (2)3. goes to the surviving spouse and deducted from
the estate of the decedent
ALLOWABLE DEDUCTIONS- NON-RESIDENT DECEDENT [ELIT-TVS]
1. ELIT (expenses, losses, indebtedness, taxes)
FORMULA:PHIL. GROSS ESTATEWORLD GROSS ESTATE x E L I T
2. Transfer for public purposes
3. Vanishing deductions
4. Share of the surviving spouse
NOTICE OF DEATH- if value exceeds Php20,000- FILE notice with BIR within two mos. Of
decedents death or within two mos. After election of qualified executor or administrator
ESTATE TAX RETURN
-if gross value of estate exceeds P200,000 or if gross estate consists of
registered property, FILE in duplicate and under OATH
-if value of gross estate exceeds P2,000,000, return must be supported by a certificate of
C.P.A.TIME FOR FILING RETURN
-within 6 mos. From decedents death
-EXTENSION: not exceed 30 days PAYMENT OF ESTATE TAX
-upon filing of the estate tax return and before delivery to any beneficiary of his distributions share of
the estate
-EXTENSION: not to exceed 5 years
-If extra-judicially settled, 2 years

-It must file bond not to exceed double the value to be paid SURCHARGE- 25% for late filing, for
late payment- 50% for filing of false or fraudulent return INTEREST 20% per annum PARTIES TO A
DONATION1. DONOR gratuitously disposes
2. DONEE receives and accepts KINDS OF DONATION1. PERSONAL PROPERTY may be
orally or in writing EXCEPT: exceeds P5,000 donation and acceptance must be in writing2. REAL
PROPERTY PUBLIC DOCUMENT ACCEPTANCE - same deed of donation or separate
instrument; done during the lifetime of the donor
RULE: HUSBAND AND WIFEG.R.: Every donation between Husband and Wife during the marriage
is VOID
EXCEPTION:
1. donation mortis causa
2. moderate gifts - family affair*** gifts coming from the conjugal property made by both
spouses are taxable, to each spouse RULE on INADEQUATE CONSIDERATION* if the
property transferred is real property classified as capital asset, the transfer is subject to
capital gains tax of 6% and not to donors tax* where the consideration is fictitious, the entire
value of the property transfer shall be subject to donors tax* the amount by which the value of
the property exceed the amount of consideration shall be deemed a gift for purposes of the donors
tax VALUATION OF GROSS GIFTS- FMV at time of donation1. Real Property- BIR zonal value or
FMV fixed by city/provincial assessor whichever is higher
2. Shares of Stock A. If listed average value at the date of donation
B. If not listed book value at the date of donation3. Personal Properties FMV at the time of
donation* FMV = pawn value x 3EXEMPTIONS/ALLOWABLE DEDUCTIONS
1. DOWRIES
RULES:
A. Exempt up to 1st P10,000;
B. Legitimate recognized or legally adopted children;
C. Made before marriage or within one year thereof.
2. GIFTS TO NATIONAL GOVT. or POL. SUB.
- not conducted for profit
3. GIFTS TO E, C, R, C, S, N, T, P, or R orgs.
- not more than 30% used for administrative purposes- may be a school or non-stock entity
DEDUCTIONS ALLOWABLE
1. ENCUMBRANCES or donated property, if assumed by the donee
2. DIMINUTION of the donated property as specified by the DONOR
RULE (non-resident donor)
1. Same allowable deductions as resident donors except that the same must be connected with
donated property situated in the Phils.
2. NO deductions for dowries
RULE if Donee is a Stranger
1. TAX PAYABLE 30% of net gift STRANGER one who is not a brother, sister (whole
or half-blood), spouse, ancestor, lineal
descendant or relative by CONSANGUINITY in the COLLATERAL LINE
withinthe 4 th degree. RULE ON POLITICAL CONTRIBUTIONS- considered TAXABLE
GIFTS- donee in this case is deemed to receive a financial advantage gratuitously
ADMINISTRATIVE PROVISIONS- donors tax return must be filed under oath and in
duplicate- filed within 30 days from date of donation

EXTENSION: not exceeding 30 days- WHEN PAID- time the return is filed EXTENSION: not
exceeding 6 mos. PROVIDED BOND- double the amount of TAXTAX CREDIT for donors tax paid
to a foreign country- donor was a Filipino citizen or resident alien at the time of foreign donationdonors taxes of any character or description are imposed and paid by the authority of a
foreign country
LIMITATIONS:
1. The amount of credit in respect to the tax paid to any country shall NOT EXCEED the same
proportions of the tax against which such credit was taken
2. The total amount of credit shall not exceed the same portion of the tax against which such credit is
taken
Transfer taxes imposed on gratuitous transmission of properties are:
1. Estate tax
2. Donors Tax
ESTATE TAX tax imposed on the right or privilege to transmit properties upon death of a decedent
or testator
D O N O R S T AX t a x i m p o s e d o n t h e r i g h t o r p r i v i l e g e t o t r a n s m i t
p r o p e r t i e s gratuitously in favor of another who accepts the same. This transmission of properties
occurs during the lifetime of the donor and the donee.
ESTATE TAX NATURE OF ESTATE TAX
It is an excise tax since the subject of the tax is the right or privilege to transmit properties and not the
property itself.
PURPOSES OF ESTATE TAX to avoid the undue accumulation or concentration of wealth
1. The primary purpose is to raise revenue in order to support the government;
2. To supplement income tax;
3. To reduce successive inequalities in wealth, meaning, to achieve social equality.
KINDS OF ESTATE TAXPAYER:
1. Resident estate taxpayer includes citizen of the Philippines., resident alien who died in the
Philippines., and such alien, at the time of his death, is a resident of the Philippines;
2. Non-resident estate taxpayer is limited to non-resident alien individual.
Real properties, personal tangible properties and personal intangible properties of
resident decedent (RD) are taxed wherever situated.
Real and personal tangible properties of non-resident decedent (NRD) are taxable only if
they are located in the Philippines.
Real and personal tangible properties of NRD are taxable only if they acquire tax situs in
the Philippines.
Personal intangible properties that are deemed to have acquired Phil. Situs are: [F,
SOB (DC, FC-85%, FC-SP), SR P]
1. Franchise which is exercised in the Phils.2. Shares of stock, obligation or bonds issued by
domestic corporation or sociedad anonima
3. Shares of stock, obligation or bonds issued by foreign corp., 85% of the business of which is
conducted in the Philippines
4. Shares, obligations or bonds acquire business suits in the Philippines. Such shares, obligations or
bonds acquire business situs in the Philippiness of they are used by foreign corp. in furtherance of its
trade or business.

5. Shares or rights in any partnership, business or in any partnership, business or

industry, established in the Philippines.If the personal intangible properties of a NRD
does not belong to the abovementioned enumeration, they may not form part of his gross income or we may also
apply the doctrine of mobilia sequntur personam.
Mobilia sequntum personam
, according to the Supreme Court, is a mere fiction of law. So, it must yield to the provision of law
which provides tax situs.
Question:
Suppose the personal intangible properties of NRD acquired tax situs in the Philippines.,
can this be exempt from real estate tax?
Answer:
YES, by applying the rule on reciprocity.
RULE ON RECIPROCITY the foreign country of that NRD does not impose or allows exemption on
tax on the properties of the citizens of the Phils. who died in that foreign country. The
phrase does not impose and allows exemption are different from each other.
When we say does not impose, this means totally exempt. A
l l o w s exemption means this may not cover all properties but only certain properties.
Case:
Country of Morocco has no international personality. If it grants exemptions to the intangible personal
properties if Filipino citizens who died in that country, will you apply also that rule on reciprocity?
Held:
YES. It does not matter whether the country has international personality ornot. What is
important is it allows or grants exemption from estate tax.
Sec. 85,Gross Estate
The value (FMV) of the gross estate of the decedent shall be determined by including the
value, at the time of his death, of all property, real or personal, tangible or intangible, wherever
situated: Provided, however, That in the case of a non-resident decedent who at the
time of his death was not a citizen of the Philippines, only that part of the entire gross estate
which is situated in the Philippines shall be included in his taxable estate.
The composition of the gross estate may include:1. Decedents Interest.
(includes yields, fruits and interest)
-The gross estate may include the fruits and income of the properties and that may
constitute the decedents interest.
-In the case of parcel of land, it may produce income in the form of harvest
which harvest may form part of the gross estate.
-In the case of apartment, the rental of such apartment should also be included, not only
the value of the property.
-Dividends
-Partnership profits
-Rights of usufruct
2. Transfer by virtue of general power of appointment
It implies that if the transfer is made under special powe
r o f appointment that should be excluded from gross estate.

-In general power of appointment, the power is exercisable or in favor of the estate, executor,
administrator or a creditor of the estate. If
thep o w e r i s e x e r c i s a b l e o t h e r t h a n t h e s e ( e s t a t e , a d m i n i s t r a t o r
, administrator or creditor of the estate), that may be considered asspecial
power of appointment.
3. Revocable Transfer Any transfer made by the decedent during his lifetime
where the decedent has reserved the right to ALTER, AMEND, TERMINATE, or REVOKE .such
transfer; it is sufficient that the decedent had the power to REVOKE, though he did not
exercise such power.
-Irrevocable transfers should be excluded from gross estate.
-Revocable transfers are transfers which are subject to alteration,termination,
amendment or modification by the decedent.
4. Transfers for Insufficient Consideration
- The amount that may form part of the gross estate is the differencebetween the FMV of
the property and the consideration given.
Example:
If the property has a FMV of P100,000 and the
considerationgiven is only P50,000, the difference of P50,000 represents ins
ufficientconsideration.
5. Proceeds of Life Insurance Policy
-Proceeds of life insurance policy may be included if:
a.the beneficiary designated is the estate executor, administrator or heirs of the decedent
whether revocable or not revocable
b.the beneficiary designated is a 3rd person who is revocably designated as beneficiary
-Proceeds of life insurance policy is excluded from the grossestate in the
following cases:
a.3rd person is irrevocably designated as beneficiary
b.proceeds of group insurance policy
t a k e n o u t b y t h e c o . f o r i t s employees

There seems to be double taxation. That is why, the purpose of vanishingdeduction is to

mitigate the harshness of double taxation. So, B may be entitled to that vanishing deduction which
may reduce his estate tax. The condition set by law is that B must have died within the 5year period. If B died 6 years after the death of A, B can no longer claim such vanishing deductions.
b . I d e n t i t y o f P r o p e r t y located in the Phils.So, there must be evidence to that
effect that this is the same property which forms part of the gross estate of A.
c.Inclusion of the tax property in the gross estate of the prior decedent.d .
Previous taxation
The estate of A which included the property subject of vanishingdeduction had been
taxed; meaning, that estate tax had been paid by prior estate.
e.No previous vanishing deductions.
Question:
So, if B died and the property is transmitted to C, his heir, that property is also considered as exclusive
property of C because it was acquired through inheritance. Can C claim vanishing deductions?

Answer:
NO, because this had already been claimed by B. You can only claim vanishing deduction once.
It is impossible that B acquired the property not through inheritance but
through donation. Donors tax had already been paid. This is an exclusive property of B because
under the law, property acquired during the marriage by gratuitous title is an exclusive
property and forms part of his gross estate. Can we apply this vanishing deduction? YES. Here, B
must have died within the 5-year period from the date of donation.
Acquisition and transmission exempt from estate tax are:
a. The merger of usufruct in the owner of the naked title
b.Transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee of the fideicommisssary.
c.Transmission of the property from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor.d . B e q u e s t s , d e v i s e s , l e g a c i e s o r t r a n s f e r s t o s o c i a l w
e l f a r e , c u l t u r a l a n d charitable institutions, no part of the net income of which inures to the
benefit of any individual and not more than 30% of said bequests, devises, legacies or transfers be
used by such institutions for administrative purposes. So, transfers to non-stock, non-profit educational
institution is not exempt from estate tax because this is not included from the enumeration
BUT exempt from donors tax.
2. Transfer For Public Use
The donee must be the government or any political subdivision. It must be used
exclusively for public use. The transfer must be done orally but testamentary disposition
and must be at its present value.
3. Other Charges Against The Exclusive Property
So, if the property has been mortgaged with a bank, we consider that as unpaid mortgage.
4. Encumbrance On Exclusive Property VALUATION OF THE GROSS ESTATE:
valuation as of the time of death
1.Real Property
The FMV equivalent to the value as determined by the BIR or zonal value ORthat of the
value as determined by the provincial or city assessor whichever is higher.2.
Personal Property
a . Tan g i b l e P e r s o n a l P r o p e r t y i f n o t b e i n g s o l d ; p a w n v a l u e x 3 ;
T h e F M V i s equivalent to the selling price of the property. (Brand new items)
b.Intangible Property includes interest, shares of stock
-It must be the FMV of the interest or shares of stock.
-If the intangible personal property is account receivable, it should be Principal PLUS
interest unpaid upon the death of the decedent except if worthless)
-If it is in the nature of usufruct, we must take into consideration the basic
standard of mortality rate.
-American tropical experience table
-IF LISTED mean or average value between the highest and lowest stock quotation
-IF NOT LISTED BOOK value
DONORS TAXDONORS TAX
is an excise tax because what is being tax here is the right or privilege to
transmit or dispose of property gratuitously in favor of another.

- Tax imposed on the privilege of transmitting property by and livingperson to another by

way of donation
-Prevents avoidance of estate tax
PURPOSE OF DONORS TAX:
1. The primary purpose is to raise revenue;
2. To supplement income tax and estate tax.
DONATION the act of liberality whereby a person disposes gratuitously of a THING ora RIGHT in
favor of another who accepts it.
DONATIONS SUBJECT TO DONORS TAX
-trust or not
-real or personal
-tangible or intangible1. Indirect donation Example: Cancellation of indebtedness2. Direct donation
Donors tax applies to both natural and juridical persons
The law says, donors tax apply whether the transfer is in trust orotherwise. So,
property held in trust may be the subject of donation. But, this contemplates of a
transfer where the dominion, the right over such property, use, enjoyment of the
same other rights, must all be transferred to the donee so that it will constitute as taxable
donation.
Read Section 104.
CHARACTERISTICS OF VALID DONATION: [F, A, C, I, D]
1. It must be given during the lifetime of the donor.
2. It must be irrevocable.
3. It must comply with the formalities of donation.
4. Acceptance of the donee.
REQUISITES OF VALID DONATION
1. It must comply with the Formalities of donation.
-If the amount of personal property is P5,000 or less, the donation maybe made orally.
-If the amount of personal property is more than P5,000 the acceptance shall be in writing.
Donation of real property must be made in a public instrument
irrespective of the amount2.
Acceptance by the donee of the donation.
-Acceptance must be made during the lifetime of the donor.
-If the amount of personal property is P5,000 or less, acceptance may be made orally.
-If the amount of personal property is more than P5,000, the acceptance shall be in writing.
-In the case of donation of real property, acceptance must be made in the same deed of
donation or in a separate public instrument.3.
Capacity
of the donor and the donee:
a. Those made between persons who were guilty of adultery or
concubinage at the time of the donation
.b. Those made between persons found guilty of the same criminal
offense, inconsideration thereof
b. Those made to a public officer or his wife,
d e s c e n d a n t s a n d a s c e n d a n t s b y reason of his office.
Incapacitated donees are: [P, R-P, G, D, NPL]

a. The priest who heard the confession of the donor during his
i l l n e s s , o r t h e minister of the gospel who extended spiritual aid to him
during the same period
.b. The relatives of such priest or minister of the gospel within the
4thdegree, the church, order, chapter, community, organization or institution to which
such priest or minister belongs
c. A guardian with respect to donation made by a ward in his favor before the final
accounts of the guardianship have been approved, even if donor should die after the
approval thereof; nevertheless, any donation made by ward in favor of the guardian when the
latter is his ascendant, brother and sister, or spouse, shall be valid.
d. Any physician, surgeon, nurse, health officers or druggist who took care of the donor
during his last illness.
e. Individuals, association & corporations not permitted by the law to receive
donations.
*The follow ing are also incapable of receiving donations by reas
o n o f unworthiness
:
[P (AC, ID, AV), C-AL, A-6 yrs., H-KVD, A or C, F-D, F]
a.Parents who have abandoned their children or induced their daughters to lead a
corrupt or immoral life, or attempted against their virtue.
B .Any person who has been convicted of an attempt against the life of the donor, his or
her spouse, descendants or ascendants.
c. Any person who has accused the donor of a crime for which the law prescribes
imprisonment for 6 years or more, if the accusation has been found groundless.
d.Any heir full of age who, having knowledge of the violent death of the
donor, s h o u l d f a i l t o r e p o r t i t t o a n o f f i c e r o f t h e l a w w i t h i n a m o n t h
u n l e s s t h e authorities have already taken action, this prohibition shall not apply to
cases wherein, according to law, there is no obligation to make an accusation.
e. Any person convicted of adultery or concubinage with the spouse of the
donor.f . A n y p e r s o n w h o b y f r a u d , v i o l a t i o n , i n t i m i d a t i o n , o r u n d u e i n f l u
e n c e s h o u l d cause the donor to make a donation or to change one already made.
g. Any person who by the same means prevents another from making a donation, or
from revoking one already made, or who supplants, conceals, or alters the latters
donation.
h. Any person who falsifies or forges a supposed donation of the decedent. Under Art. 87
of the F.C., husband and wife are prohibited from making donation toeach other.
4. Intentionto donate the property of the donee (or DONATIVE INTENT).
Exception:
Transfer of insufficient consideration in the case of a contract of sale.
Example: If the FMV of the property is P100,000 and P50,000 was the
consideration given. The difference of P50,000 is considered a donation.* The amount received
by a disinherited heir is subject to donors tax because he has no right to such property and the same
was gratuitously given, so there is no donative intent.
5. Delivery of the property
These are special duties imposed on imported articles. This may be imposed subject to
the ff. requisites:

1. There must be a deliberate and continuous sale of imported article in the Philippines as price lower
than the prices in the exporting country.
2. This must prejudice or cause or likely to cause injury to our local industry.
Situation:
There are articles of foreign origin the prevailing price of which in the USis equivalent to
P100. These articles are sold or dumped in the Phils. at lower than theprevailing price in the US
because they are saleable in the U.S.So, this will prejudice our local industries. In order to protect our
local productor to discourage people from buying this imported product, we
should be imposespecial duties in addition to the regular duties. Dumping duties should be
imposed.
Countervailing duty duty equal to the ascertained or estimated amount of the
subdsidy or bounty or subvention granted by the foreign country on the production,
manufacture, or exportation into the Phils. of any article likely to injure an industry in the Phils. or retard
or considerably retard the establishment of such industry.

Imposed on articles, upon the production, manufacture or export of which any

bounty or subsidy is directly or indirectly, granted in
thecountry of origin and/exportation. No need to show proof that
theimports cause injuries to domestic industries producing the sameproducts.
The duty is equal to the ascertained or estimated amount of the bounty or subsidy given.
Situation:
S o m e t i m e s i m p o r t e d p r o d u c t s e n j o y s c e r t a i n s u b s i d y f r o m t h e i r govern
ment. So, they have an advantage. Our local products for example, does not enjoy
similar subsidy. We should counter that advantage by imposing countervailing duties. The
purpose there is to protect our local products against unfair
competition. This represents the inland excise tax on locally manufactured articles of thes
ame kind to off-set this advantage. As regards dumping duties, the extent of the special duty
is the amount thatrepresents under-pricing. As regards countervailing duties, the
extent is the excise inland tax or the amount of advantage enjoyed by that imported
article.
Marking duty duty on ad valorem basis imposed for improperly marked articles. The requirement
that foreign importation must be marked in any official language of the Phils., the name of
the country of origin of the article.
The purpose is to prevent deception of consumers.
The articles must be properly marked, otherwise a special duty of 5% of the value shall
be imposed.
Retaliatory or Discriminatory duty
duty imposed on imported goods whenever it is found as a fact that the
country of origin discriminates against the commerce of the Philippines in such manner
as to place it at a disadvantage compared with the commerce of any foreign country.
The amount may be increased in an amount not exceeding 100%
Ad valorem
when the President finds the public interest may be served thereby.
This may be imposed by the President of the Philippines when our goodsare
discriminated against.

As regards dumping, countervailing and marking duties, it is the Sec

of Finance, upon recommendation of the Tariff Commission, who mayimpose
these duties.
Question:
What is the extent of the flexible power of the President of the Phils. Under the TCC?
Answer:
That includes the power to impose discriminatory duties. The President upon
recommendation of the Tariff Commission may increase the tariff rates by not more than
5x or meaning 500x of the tariff rates. He may also decrease the tariff rates by not less than 50%.
He can only exercise these powers in the interest of the national economy, national
security and general welfare of the people.
2. Other duties:
a.Storage fee this is charged on the goods or articles stored in a warehouse under the
control and supervision of the BOC. Articles owned by the government are exempt from storage fee is
these articles are stored in a government warehouse.
b.*Wharfage duesEven if there is no wharf where the goods may be unloaded,
wharfage dues may still be imposed because it is not a duty or charge on the use of the
wharf. Even if the goods are unloaded in a private wharf or seashore, wharfage dues still be imposed
because this is a duty imposed on the cargoes or articles which are unloaded. These are taxes.
These are not really custom duties. The significance of this is that when tax
exemption is granted from all forms of taxes, this may be included. If the
exemption is only from custom duties, wharfage dues is not included.
c.Arrastre charges this is a duty imposed on goods or articles for handling, receiving or
custody of such articles.
d.Tonnage fees this is based on weight or tonnage of vessel.
e.Harbor fees
f.Berthing fees this is imposed on the vessel for mooring berthing at
aparticular pier or port.Berthing fees may only be imposed if the vessel is wharfed or berthed
atnational port. So, if it is wharfed at privately owned port, that is not subject toberthing
fees.
Steps in the imposition of custom duties:
1.Declaration of goods or articles
2. Assessment by an appraiser. Determine the value applying the schedule of values
stated in the tariff rates and that is subject to the approval of the Collector of
Customs.
3. Liquidation which may be:
(a)Partial means the value cannot be promptly ascertained.
( b ) F i n a l - m e a n i n g c u s t o m d u t i e s h a d b e e n a s c e r t a i n e d o r f i n a l l y deter
mined.If these duties are not paid by the taxpayer, the government or the BOC has the power to
impose the following administrative sanctions:
(1)Surcharges may be imposed under certain situations
(2)Fines may be imposed under certain situations
( 3 ) S e i z u r e o r f o r f e i t u r e Forfeiture is the penalty , seizure is the remedy.
Situations where goods may be seized or forfeited by the government:

(a)Articles, vessels, aircraft may be the subject matter

o f s e i z u r e i f t h e y a r e unlawfully used in the importation of foods into the Philippines or
exportation of goods form the Phils.
Case
: Jose had a vessel, M/V Maria Victoria. It was unlawfully used for theimportation
of cargo. When this was seized by the government, Jose raised the defense of good faith.
Held:
77
(1)It is an action directed against the articles and in fact, the caption
o f t h e case is Republic of the Phils. vs. M/V Maria Victoria. It is a proceeding in rem, so good faith is
not a defense.( 2 ) E v e n i f t h e v e s s e l d i d n o t c a r r y t h e c o n t r a b a n d , t h a t
m a y b e t h e s u b j e c t matter of seizure if the vessel facilities the importation of that
contraband.I t i s n o t a l s o r e q u i r e d t h a t t h e v e s s e l m u s t c o m e f r o m t h e f o r
e i g n country.
Case:
Cruz was caught carrying a bulk of foreign currencies. These were seized by the
government because she had no license issued by the CB to carry said sum of foreign currency.
Held:
Cruz must prove that she had a license otherwise seizure was proper. The burden of proof
lies on the importer.
( b ) E x c e s s i v e s e a s t o r e s . Sea stores are the provisions of the vessel
necessary for administration and maintenance.
( c ) E x c e s s i v e s e a s t o r e s f o r a i r c r a f t . Sea stores must be in the place
where it should be displayed. If these are kept in the cabin of the crew, these may be the subject
matter of seizure because these are considered excessive.
(d)Unla wf ul transfer of cargoes from one vessel to another before
r e a c h i n g t h e point of destination.
(e)Unmanifested articles
( f ) P r o h i b i t e d a r t i c l e s
( g ) D e v i c e s , r e c e p t a c l e s
(h)Envelopes, boxes, trunks
(
i
)
B
e
a
s
t
(j)Thing of value or money which is intended to influence BIR officers.

Tax Remedies under the Tariff and Customs Code:

Remedies
Government Importer

(1) Administrative or extra-judicial

(a) Enforcement of tax lien
(b) Seizure(
a) Tax refund
(b) Abandonment
(c)Protest
(2) Judicial

(a) Filing of civil action

(b) Filing of criminal action if there is fraud and itmust be serious

(a) Appeal to CTA, CA, SC
(b) Filing of criminal action against erring Customs officials
ENFORCEMENT OF TAX LIEN
Requisites:
(1)Articles must neither be prohibited nor irregular
(2)The articles must be in the possession of the BOC
If the articles are prohibited or irregular, the remedy is seizure Abandonment may be express or
implied.
Cases cognizable by the BOC
(1)Seizure cases on the part of the government and
(2)Protest case on the part of the importer
2. Donors Tax
ESTATE TAX
tax imposed on the right or privilege to transmit properties upon death of the decedent or testator.
DONORS TAX
t a x i m p o s e d o n t h e r i g h t o r p r i v i l e g e t o t r a n s m i t p r o p e r t i e s gratuitously
in favor of another who accepts the same. This transmission of properties occurs during the lifetime of
the donor and the donee.
ESTATE TAXNATURE OF ESTATE TAX
It is an excise tax since the subject of the tax is the right or privilege to transmit properties and not the
property itself.
PURPOSES OF ESTATE TAX:
1. The primary purpose is to raise revenue in order to support the government;
2. To supplement income tax;
3. To reduce excessive inequalities in wealth; meaning, to achieve social equality.
KINDS OF ESTATE TAXPAYER:
1.Resident estate taxpayer
includes citizen of the Phils., resident alien who diedin the Phils., and such alien, at the time of his
death, is a resident of the Phils.;2.
Non-resident estate taxpayer
is limited to non-resident alien individual. Real properties, personal tangible properties and personal
intangible properties of

resident decedent (RD) are taxed wherever situated. Real and personal tangible properties
of non-resident decedent (NRD) are taxable

only if they are located in the Phils. Personal intangible properties of NRD are taxable only if they
acquire tax situs in the

Phils.

Personal intangible properties that are deemed situated or deemed

tohave acquired Phil. situs are:

1. Franchise which is exercise in the Phils.2. Shares of stock, obligation or bonds issued by
domestic corporation or
sociedad anonima
3. Shares of stock, obligations or bonds issued by foreign corp. 85% of the business of which is
conducted in the Phils.
4. Shares, obligations, bonds issued by a foreign corp. which acquired business situs in the Phils.
Such shares, obligations or bonds or in any partnership, business or industry established
in the Phils. If they are used by such foreign corp. in furtherance of its trade or business.
5. Shares or rights in any partnership, business or in any partnership, business or
industry established in the Phils.If the personal intangible properties of a NRD does
not belong to the abovementioned enumeration, they may not from part of his income or we may also apply
the doctrine of mobilia sequntur personam.
Mobilia sequntur personam, according to the Supreme Court, is a mere fiction of law. So, it must
yield to the provision of law which provides tax situs.
Question:
Suppose the personal intangible properties of NRD acquired tax situs in the Phils., can
this be exempt from estate tax?
Answer:
YES, by applying the rule on reciprocity.
RULE ON RECIPROCITY
the foreign country of that NRD does not impose or allows exemption on estate tax on the
properties of citizens of the Phils. who died in that foreign country. The phrase does not
impose and allows exemption are different from each other.
When we say does not impose, this means totally exempt. A
l l o w s exemption means this may not cover all properties but only certain properties.
Case:
Country of Morocco has no international personality or not. What is important isit allows or grants
exemption from estate tax.
Sec. 85.Gross Estate. The value of the gross estate of the decedent shall be
determined by including the value, at the time of his death, of all property, real or
personal, tangible or intangible, wherever situated. Provided, however, That in the case
of a non-resident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included
in his taxable estate.
The composition of the gross estate may include:1. Decedents Interest.
-The gross estate may include the fruits and income of the properties and that may
constitute the decedents interest.
-In the case of parcel of land, it may produce income in the form of harvest
which harvest may form part of the gross estate.
-In the case of apartment, the rental on such apartment should also be included, not only
the value of the property.
2. Transfer by virtue of general power of appointment

It implies that if the transfer is made under special powe

r o f appointment that should be excluded from gross estate.
-The general power of appointment, the power is exercisable or in favor of the estate,
executor, administrator or a creditor of the estate. If the power is exercisable other than these
(estate, administrator or creditor of the estate), that may be considered as special power of
appointment.
3. Revocable Transfer
-Irrevocable transfer should be excluded from gross estate.
-Revocable transfers are transfers which are subject to alteration, termination,
amendment or modification by the decedent.
4. Transfer for Insufficient Consideration
-The amount that may form part of the gross estate is the differencebetween the FMV of
the property and the consideration given.
Example:
If the property has a FMV of P100,000 and the consideration given is
onlyP 5 0 , 0 0 0 , t h e d i f f e r e n c e o f P 5 0 , 0 0 0 r e p r e s e n t s t h a t i n
s u f f i c i e n t consideration.
5. Proceeds of Life insurance policy.
-Proceeds of life insurance policy may be included if:
a.3rd person is irrevocably designated is the estate executor, administrator or heirs of the decedent
b . t h e b e n e f i c i a r y d e s i g n a t e d i s a 3 rdperson who is revocably designated as
beneficiary
Proceeds of life insurance policy is excluded from the gross estate in the
following cases:
1. 3rdperson is irrevocably designated as beneficiary
2. proceeds of group insurance policy
3. proceeds of accident insurance policy except if accident insurance policy has a
characteristic4.Proceeds of GSIS Life Insurance Policy
Note
: A s r e g a r d s t h e e s t a t e e x e c u t o r, a d m i n i s t r a t o r o r h e i r s a s beneficiary,
it is immaterial whether the designation is irrevocable or revocable.
DEDUCTIONS FROM GROSS ESTATE:
DEDUCTIONS FROM THE GROSS ESTATE MAY BE:
1. Conjugal deductions
2. Absolute deductions
3. Exclusive deductions
I. CONJUGAL AND ABSOLUTE DEDUCTIONS include:
1. Family home
2. Judicial or funeral expenses
3. Casualty losses
4. Indebtedness/unpaid claim against the estate
5. Accrued taxes (before the death of the decedent)
6. Standard Deduction

7. Separation pay given to the heirs of decedent on account of death.

Discussion:
1. Family home, subject to the following conditions:
a. there must be only one (1) family home;
b. there must be certification issued by the Barangay Captain that the decedent is a
resident of and own that family home, in that particular locality;
c. the amount that is deductible or the FMV of the family home
s h o u l d n o t b e more than P1M;d.the FMV of the family home is P5M, this should be
included in the gross estate of the decedent. But when you claim deductions, you can only claim
up to P1M.
2.Expenses which may be in the nature of judicial expenses or funeral expenses.
In the case of funeral expenses, the amount deductible is the actual funeral expenses or
the amount deductible is limited only to P500,000;
There is no limitation as to amount with regard to judicial expenses. As
long as it is paid or incurred in connection with the preservation,adm
i n i s t r a t i o n o r s e t t l e m e n t o f t h e e s t a t e , i t m a y b e c l a i m e d a s deductions,
judicial expenses also include extra-judicial expenses.
3. Losses that may arise from casualty or casualty losses such as fire, storm,
shipwreck, robbery, embezzlement, theft and other casualty losses.
These losses must be sustained not later than six (6) months after the death of the
decedent.
4. Indebtedness which partake of the nature of unpaid claims against the estate.
There must be supported by notarized document. These obligationsm u s t b e i n c u r r
e d w i t h i n t h r e e ( 3 ) y e a r s p r i o r t o t h e d e a t h o f t h e decedent.
Another indebtedness which may be claimed as deduction is claimagainst
insolvent persons. Here, the claimant is the decedent. In order to be deductible, this claim
must be included in the gross estate.
5. Taxes which must accrue before the death of the decedent.
6. Standard Deduction
The amount is P1M. So, this may only be applied if the gross estate and the decedent is
more than P1M.
7. Separation pay is given to the heirs of the decedent on account of death.
The procedure is to include the amount in the gross estate and thenclaim this thereafter
as deductions.
II. EXCLUSIVE DEDUCTIONS
These are deductions against exclusive properties.
These may include: (VP-CE)
1. *Vanishing deduction
2.Transfer for public use
3.Other charges against exclusive property
4.Encumbrance on exclusive property
3. Other Charges Against the Exclusive Property
- So, if the property has been mortaged with a bank, we consider that as
unpaid mortgage.

4. Encumbrance on Exclusive Property VALUATION OF THE GROSS ESTATE:

1. Real Property
The FMV equivalent to the value as determined by the BIR or zonal value and that of the value as
determined by the provincial or city assessor whichever is higher.
2. Personal Property
a.Tangible Personal Property The FMV is equivalent to the selling price of the
property.
b.Intangible Personal Property includes interest, shares of stock.
-it must be the FMV of the interest or shares of stock
-If the intangible personal property is account receivable, it should be Principal PLLUS
interest unpaid upon the death of the decedent.
-If it is in the nature of usufruct, we must take into consideration the basic
standard of mortality rate.
TAX REMEDIES

A c c o r d i n g t o t h e S C , g o v e r n m e n t a n d t a x p a y e r s m u s t s t a n d o n reasonab
ly equal terms.
Basically, the remedies that may be availed of by the Government or the taxpayer may be grouped
into:
a.Administrative remedies
b.Judicial remedies

If the tax law is silent on administrative remedies, the government maystill avail of the usual
administrative remedies such as Distraint of personal property, or Levy on real property. But
that may be resorted to by the government in the collection of taxes are:
a. Distraint of personal property
b.Enforcement of tax lien
c.Levy on real property
.
Distrain and levy can only be done if notice is given.
If the tax law is silent on administrative remedies, the taxpayer may still avail of the usual
administrative remedies of protest and refund for purposes of convenience and
expediency.
If the tax law is explicit on administrative remedies, the taxpayer must observe the principle of
exhaustion of administrative remedies. Under the Tax Code, if an assessment is made
by the BIR, the remedy of the taxpayer is to protest first the assessment. It is the
decision of the BIR on that disputed assessment that is being appealed to the CTA.
In claiming for tax refund, the taxpayer have to file first a written claim for refund with the BIR
Commissioner.

E x c e p t i o n t o t h e P r i n c i p l e o f E x h a u s t i o n o f A d m i n i s t r a t i v e Remedie
s:
a . i f i t i n v o l v e s judicial questions
b . i f i t i n v o l v e s disregards of due process
c . i f i t i n v o l v e s a n illegal act

.
Judicial Remedies:
IF the tax law is silent on judicial remedies, the government can still avail of the usual
judicial remedy. Example: filing an action for collection with the court.
If the tax is silent on judicial remedies, the taxpayer may file a special civil action for
declaratory relief. But this does not apply as far as the NLRC or the TCC is concerned
because these particular tax laws are explicit on this judicial remedies.
If the tax law is explicit on judicial remedies, the government should observe the
provisions of the law.
Example:
The filing of an action for collection with the Court must be approved by the BIR
Commissioner.
Distinction between the Distraint and Levy Distraint of personal property
1. The subject matter is personal property, stocks and securities, bank accounts, debts and
credits .
2. 2. In the event that the taxpayer failed to pay the tax, the BIR will issue warrant
of distraint
.3. The only requirement is posting of notice of sale in 2 public or conspicuous places4. If the
bid is not equal to the amount of tax liability, the BIR may purchase the
property distrained for and in behalf of the government.
5. There is no right of redmption6. There is that remedy of constructive distraint of personal
property.
Levy of real property
1. The subject property is real property
2. What is issued is in the nature
of an authenticated certificate describing the property and stating the name of the
taxpayer as well as the amount due3. Requires not only posting but also publication of the notice of
sale in a newspaper of general circulation in 3 consecutive weeks.
4. If the bid is not equal to the tax liability of there is no bidder, the BIR may forfeit such
real property levied by the government.
5. There is right of redemption within 1 year from the date of sale plus 15% interest.
6. There is no such remedy as constructive levy of property.
Constructive Distraint can only be resorted to under the following situation:Code:
C.A.R.L.)
1. When a taxpayer cancels or hides his property
2. If he performs any act which will obstruct the collection efforts of the BIR
3. If he is retiring from business subject to tax
4. When he is about to leave the Philippines Enforcement of the tax lien:
If the taxpayer failed despite receipt of notice to pay the BIR, a lien is created against the
properties of the taxpayer.
It is the discretion of the BIR to avail itself of remedies which may result in the expeditious collection of
taxes.
Case:
Which is preferred, the claim of the government arising from tax lien or the claim of the
workers predicated on the judgment rendered by the NLRC?
Held:

The claim of the government arising from tax lien is superior to the claim of a private
litigant predicated on a judgment.
Exception:
The claim of the laborers may be superior under Art. 110 of the Labor Code when the
employer was declared bankrupt of judicial liquidation.
In observing the provisions of the tax code in regard to distraint or levy,
the BIR cannot apply or invoke the presumption of regularity in
administrative proceedings. So, if the procedure had been questioned by the taxpayer, it is
not for the taxpayer to prove that the procedures under the NLRC in regard to distraint on
levy had been complied with.

Revenue taxes are self-assessing taxes.

Requisites of Assessment:
1. Written notice stating that the amount is due as tax.2. Written notice must contain a demand for the
payment of such tax.

Assessment is not a condition sine qua non for purposes of collecting taxes. This is so
because demand is not required. The rule under Art.1169 of the NCC that demand is
required before a person may incur in delay cannot be applied. Taxpayer incurred in delay if he
fails to pay the tax on date fixed by Tax Code.

Assessments, made by the BIR Commissioner are presumed correct. The presumption does not
violate the due process under the Constitution because the presumption is merely disputable.

N o r m a l l y, t h e B I R m a y r e q u i r e t h e t a x p a ye r t o s u b m i t r e p o r t s ,
documents, books of accounts and other report to establish his tax liability. In
the absence of these reports, documents, etc., the BIR may determine the tax liability by
using other methods.

*The BIR can determine the tax liability of the taxpayer on the basis of that so-called
best evidence obtainable in the absence of said reports etc. In one case, agents of the BIR
used the books of account seized as a result of raid by means of search warrant.
NET WORTH OR INVENTORY METHOD (also called Net Investigatory Method)
This is another method that may be employed by the BIR in determining the tax liability of
the taxpayer. This is an expansion of that accounting principle,
assets less liabilities equals net worth
.
Assessment is made when it is mailed, released or sent. Example:
If it was received by the taxpayer in a particular date (Dec. 5, 1997), you should count the
prescriptive period for making an assessment from the date it was m a i l e d , r e l e a s e d
o r s e n t b y t h e B I R a n d n o t f r o m t h e r e c e i p t o f t h e n o t i c e o f assessment
by the
taxpayer. The assessment may be subject to revision by the BIR. If revised, theprescriptive
period will commence to run from the safe when such revised assessment is mailed, released or sent.

So, it is not from the date the original assessment is mailed etc. but from the date the revised
assessment has been mailed. The making of assessment is prescriptible.

The rule is, the BIR may collect taxes

w i t h o r w i t h o u t p r i o r assessment.PRESCRIPTIVE PERIOD FOR MAKINGAN
ASSESSMENT &
COLLECTIONW i t h
p r i o r
a s s e s s m e n t W i t h o
u t
p r i o r assessment
I. Return filed is not false orfraudulenta . R e t u r n w a s f i l e
butt h e r e
e x i s t
a deficiencyb . R e t u r n w a s f i l e d
b u t n o p a y m e n t h a s been made
3 years from the date of actual filing.
If it was filed earlier than the date fixed by the Tax Code.
COLLECTION: Within
3years f r o m t h e d a t e o f assessment
3 years from the date of actual filing o r f r o m t h e
l a s t d a y f i x e d b y l a w f o r filing such return.II.
Failure/Falsify/Fraudulenta . I n t e n t i o n a l f a i l u r e t o file a
returnb . F a l s e r e t u r n c . F r a u d u l e n t r e t u r n
1 0 y e a r s f r o m t h e discovery
o f
s u c h omission of failure, falsityor fraud
COLLECTION: 3 yearsf r o m
t h e
d a t e
o f
a
ssessment. Taxes may be collectede v e n
w i t h o u t
p r i o r a s s
e s s m e n t
a n d prescriptive period is
10years
from the discovery o f f a i l u r e o r o m i s s i o n falsity or fraud.
Notes:
The rule is if prior assessment has been made, the BIR can availof the administrative and
judicial remedy. But if without prior assessment, the BIR canonly avail of the judicial remedies.
Return must be the one prescribed by the BIR. SO, if you file your Booksof Accounts in lieu of that
return, that does not constitute return.
PRINCIPLES GOVERNING THE FILING OF AN ACTION FOR COLLECTIONBYTHE BIR
Collection is proper under the following situations:
a.BIR assessment is considered final and executory, if no protest or dispute
has been made by the taxpayer. IF protested by the taxpayer but he did not appeal, the BIR
decision on such protest, the effect is that the BIR decision shall be considered final and
executory.
b. IF he appeal the decision of the BIR of the Commissioner to the CTA but he did not
appeal the decision of the CTA to CA, the decision of the CTA shall be final and executory.
c.If he appeal to the CA but the CA decision affirming that decision of the BIR was not
appealed to the SC, CA decision shall be final and executory.
d. If appealed to SC but SC affirm the decision of the CA, SC decision is final
and executory.

If the decision of the BIR is final and executory, the assessment made cannot be
questioned. The issue of prescription can no longer be raised except if the BIR submitted the particular

issue for the resolution of the Court, that is considered as waiver on the part of the BIR and such issue
of prescription may be subject to resolution.

There is no provision in the TAX Code that prohibits the BIR from
filinga n a c t i o n f o r c o l l e c t i o n e v e n i f t h e r e s o l u t i o n o n t h e m o t i o n f o r rec
onsideration on the assessment made is still pending.

When the case is pending before the CTA, collection may also be made by filing of an answer
to the petition for review with the CTA. This is tantamount to a filing of collection of tax.
This will also stop the running of the prescriptive period for collection of taxes.

Collection of taxes is prescriptible.

GROUNDS FOR THE SUSPENSION OF PRESCRIPTIVE PE
R I O D I N T H E COLLECTION OF TAXES:
(Code:
N.A.P.O.C.A.R.
)1.No property could be allocated;
2.Agreement between the BIR and the taxpayer to the effect that the prescriptive period
shall be suspended pending the negotiation;3. If the BIR is Prohibited from a distraint or levy of real
property;
4. If the taxpayer is Out of the Philippines;
5. If the address of the taxpayer Cannot be located;
6. The filing of an Answer to the petition for review executed by a taxpayer with the CTA;
7. When a Request for reinvestigation has been granted by the BIR.
PRINCIPLES IN CRIMINAL ACTION
1. The filing of an action requires the approval of the BIR Commissioner. Also, the filing
o f c i v i l a c t i o n r e q u i r e s t h e a p p r o v a l o f t h e B I R C o m m i s s i o n e r. B U T t h
i s i s n o t jurisdictional. This is merely a formal defect which can be cured.2. The purpose
of filing criminal action is to impose statutory penalties.3. The payment of tax liability does not
extinguish the criminal liability of the taxpayer rising from the violation of the provision of the Tax Code.
This is so because the civil liability arises from the failure of the taxpayer to pay and this
does not arise from felonious act.4. The acquittal of the taxpayer from criminal
liability does not carry with it the extinguishments of civil liability.5. The penalty of subsidiary
imprisonment applies only to the failure of the taxpayer to pay the penalties. But, the Tax Law is
silent on the failure of the taxpayer to pay his deficiency or delinquency tax.
DEFICIENCY VS. DELINQUENCY

In deficiency, the taxpayer filed a return but the same was deficient. Deficiency is the
difference between the tax due and the tax paid.

In delinquency, the taxpayer did not file a return.

FALSE RETURN vs. FRAUDULENT RETURN
In the case of
false return, this is a deviation from the truth. It may be the result of mistake, error, or
negligence of the taxpayer. It is not always intentional because it may be the result of an

honest opinion of the CPA. In fraudulent return, there is always the intent to defraud the government
to evade taxes. It is always intentional and deliberate.

Criminal action may be suspended if the taxpayer is absent from the Philippines.

FIVE (5) years the prescriptive period for filing a criminal action for violations of the
provision of the Tax Code.

In the case of refusal to pay the tax, the 5-year prescriptive period will commence to run
from the date final notice or demand has been served upon the taxpayer.

As regards violation of the Tax Code, if the violation is known the 5 year
prescriptive period shall commence to run from the date of the
discovery of the violation and the institution of judicial proceedings for investigation and
punishment. The law uses the conjunction and. So, it will commence to run only from the time the
BIR referred the case to the Fiscals Office or City Prosecutor. In effect, it is always in the
control of the BIR.
REMEDIESOF THE TAXPAYER
BEFORE PAYMENT, the taxpayer may dispute or protest the assessment. He may also
invoke the power of the BIR Commissioner to compromise tax liability. If you RECEIVED AN
ASSESSMENT by the BIR, the remedies are:
a. File a request for reconsideration of the assessment or this is a claim
for re-evaluation of the assessment based on the existing records.
b. b. File a request for investigation of the assessment --- it is also a claim for a reevaluation of the assessment on the basis of newly discovered evidence, or
additional evidence that the taxpayer intends to present in the reinvestigation.
c. WHERE TO FILE: (a) & (b) BIR Commissioner
SSUES which may be raised Question of law or factor both questions of law and fact
WHEN Within 30 days from receipt of such assessment
IF the request for investigation or reconsideration has been denied by theBIR:
1. File a motion for reconsideration of the decision with the BIR; OR2. Appeal the decision with
the CTA.*** Motion for reconsideration must raise new grounds, meaning grounds which have
not been raised in that request for reconsideration or reinvestigation. Otherwise,
it is just a pro-forma motion; it will not suspend the period within which to appeal
the BIR decision to the CTA which is 30 days from receipt of the BIR decision.
2. ISSUES that may be raised on appeal with the CTA >>> Questions of Law or fact OR both
If CTA affirms the decision of the BIR:

Appeal the CTA decision to CA.

ISSUES
Questions of law
WHEN Within 15 days from receipt of the CA decision
The taxpayer may, instead of filing a protest, file a written claim for refund.
REQUISITES FOR FILING REFUND:

1. This must be filed within the two (2) year period from the date of payment;2. The fact of withholding
must be proven;3. This must be included in the income tax return of the taxpayer;4. It must be shown
that the payment or the amount stated in the return was received by the government.
WHERE TO FILE REFUND: --- BIR ISSUES: --- Questions of law or fact OR--- both OR--- the
taxes are illegally or erroneously collected
ILLEGALLY COLLECTED TAX vs. ERRONEOUSLY COLLECTED TAX:
Illegally collected tax means it violates certain provision of the law. It may not be
authorized by a peculiar Tax Law or statute.
Erroneously collected tax
means there may be a law passed but there was a mistake in the collection.
WHEN TO FILE: Within 2 years
from the date of payment> Payment must be proven in contemplation of Tax Law, there is
payment when the tax liability is fully paid. So, if it is payable in installment, there can
only be payment when the final installment has been paid